Under the Goods and Services Tax system, demand can be raised when there is a short payment or incorrect utilization of ITC by the taxpayer.
Note:
GST which is payable are based on self-assessment by the taxpayer. If the taxpayer accurately assesses and pays the tax, there are generally no issues.
If there is a discrepancy in payment or incorrect use of ITC, tax authorities can initiate demand proceedings against the taxpayer.
Types of Demand under GST
GST demand notices may be issued by the tax authorities in two situations:
| Types | Section 73 of GST Act | Section 74 of GST Act |
| Nature | No Fraud or Misrepresentation | Fraud or Misrepresentation |
| Applicable | It is applicable when taxes are not paid, short-paid, erroneously refunded, or when ITC is wrongly utilized or availed. | It is applicable when taxes are not paid, short-paid, wrongly utilized or involves in fraud, wilful misstatement, or suppression of facts to evade tax. |
| Time Limit | It must be completed within 3 years from the date of filing the annual GST return for the relevant financial year. | It must be completed within 5 years from the date of filing the annual GST return for the relevant financial year. The officer must issue a notice for tax recovery at least 6 months before the time limit. |
Penalties under GST
Penalties under GST may arise if dues are not cleared within the specified time limit.
| Types | Penalty under Section 73 of GST Act | Penalty under Section 74 of GST Act |
| Dues Paid Before Show Cause Notice | No penalty if the dues are cleared before the issuance of the show cause notice. | Penalty is 15% of the tax amount due if the dues are cleared before the issuance of the show cause notice. |
| Dues Paid Within 30 Days of Show Cause Notice | No penalty if the dues are cleared within 30 days of the issuance of the show cause notice. | Penalty is 25% of the tax amount due if the dues are cleared within 30 days of the issuance of the show cause notice. |
| Dues Paid After 30 Days of Order Issuance | Penalty is applicable, and it is 10% of the tax dues or INR 10,000, whichever is higher. | Penalty is 50% of the tax amount due if the dues are cleared after 30 days of the issuance of the order. |
| Any Other Case | 10% of the tax dues or INR 10,000, whichever is higher. | In cases other than the above, the penalty is 100% of the tax amount due. |
Recent Case: UltraTech Cement grapples with GST Demands and Penalties
UltraTech Cement faces GST demands issued by Assistant Commissioner CGST & Central Excise and Joint Commissioner - Central Tax, South Kolkata. According to the filing, UltraTech Cement is facing two separate orders.
- First Order: GST demand of Rs 17,60,661 with interest and penalty of Rs 1,76,066.
- Second Order: GST demand of Rs 54,252 with interest and penalty of Rs 20,000.
GST demand of Rs 1.14 crore related to alleged non-payment of differential GST on mined limestone royalty. Demand confirmed at Rs. 1,14,87,546 with interest and penalty of the same amount.
Company Response
- UltraTech Cement disclosed the information through a filing with the Bombay Stock Exchange (BSE).
- Considering legal recourse in response to GST demands.
- No specific details yet provided on allegedly ineligible ITC transitioned to GST.
Potential Impact
- Analysts speculate potential financial and market impact.
- Stakeholders and investors will closely monitoring the company's response.
Future Actions
- UltraTech Cement likely to evaluate options in addressing GST challenges.
- Uncertainty regarding broader implications for operations and financial performance in upcoming quarters.
Ongoing Situation
- The unfolding situation will determine how UltraTech Cement navigates legal complexities.
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